Expenses Total expenses increased by Rp3,695 billion, or 6.8,

See Note 41 to our Consolidated Financial Statements for further details on our contractual commitments. In addition to the above contractual obligations, as of December 31, 2014, we had long-term liabilities for pension plan and post-retirement health care benefits and contributed Rp226 billion to plan. See Notes 36 to our Consolidated Financial Statements..

B. Indebtedness

Consolidated total indebtedness consisting of short-term and long-term loans and other borrowings as of December 31, 2014, 2013 and 2012 were as follows: As of December 31, 2014 2013 2012 Rp billion US million Rp billion Rp billion Indonesian Rupiah 20,013 1,615 17,543 16,192 US Dollar 1 2,643 213 1,734 2,053 Japanese Yen 2 796 64 979 1,031 Total 23,452 1,892 20,256 19,276 1 The amounts as of December 31, 2012, 2013 and 2014 translated into Rupiah at Rp9,645, Rp12,180 and Rp12,390 = US1, respectively, being the Reuters sell rates for US Dollar at each of those dates. 2 The amounts as of December 31, 2012, 2013 and 2014 translated into Rupiah at Rp111.8, Rp115.9 and Rp103.6 = Yen 1, respectively, being the Reuters sell rates for Yen at each of those dates. Of our total indebtedness, as of December 31, 2014, Rp7,709 billion Rp6,210 billion, Rp4,222 billion and Rp5,311 billion were scheduled for repayment in 2015, 2016 to 2017, 2018 to 2019 and thereafter, respectively. For further information on our Company’s indebtedness, see Notes 17-21 to our Consolidated Financial Statements.

C. Material Contract

In 2014 and 2013, we did not enter into any new material contracts nor did we amend any existing material contracts, other than contracts entered into or amended in the ordinary course of business. LIQUIDITY Liquidity Sources The main source of our corporate liquidity is cash provided by operating activities and long-term debt through the capital markets as well as long-term and short-term loans through bank facilities. We divide our liquidity sources into internal and external liquidity.

A. Internal Liquidity Sources To fulfill our obligations, we rely primarily on our internal

liquidity. As of December 31, 2014, we had Rp17,672 billion in cash and cash equivalents available, which increased by Rp2,976 billion compared to Rp14,696 billion in 2013. In 2014, the increase of cash flow provided by operating activities primarily arise from cash receipts from customers of Rp84,748 billion. We made net repayments of current indebtedness for borrowed money of Rp5,843 billion in 2012, Rp6,239 billion in 2013 and Rp7,724 billion in 2014. Cash outflows in 2014 reflected payments for short-term loans and other borrowings of Rp2,247 billion and long-term loans and other borrowings of Rp4,538 billion. Our internal liquidity strength reflected in our current ratio, which we calculate as current assets divided by current liabilities, maintain over 100. In 2014 our curent ratio was to 106.2 compared to 116.3 in 2013. 132 2014 Annual Report PT Telkom Indonesia Tbk Persero FINANCIAL AND PERF ORMANCE HIGHLIGHT MANA GEMENT REPOR T PREF A GENERAL INF ORMA TION OF TELK OM INDONE SIA MANA GEMENT’S DISCUSSION AND ANAL Y SIS CORPORA TE GO VERNANCE SOCIAL AND ENVIRONMENT AL RE SPONSIBILITY APPENDICE S

B. External Liquidity Sources Our primary external sources of liquidity are short and

long-term bank loans, two-step loans, bonds and notes payable. In 2014 we used external liquidity bank loans of Rp6,626 billion and other borrowings of Rp3,580 billion.

C. Outstanding Liquidity Sources We had undrawn loan facilities which include the following

sources of unused liquidity: - CIMB Niaga loan facility in the amount of Rp820 billion; - BNI loan facility in the amount of Rp234 billion; - BRI loan facility in the amount of Rp6 billion; - Danamon Bank loan facility in the amount of Rp20 billion; - Bank Ekonomi Raharja loan facility in the amount of Rp70 billion; - Syndicated loan facility of BNI, BRI and Bank Mandiri in the amount of Rp103 million. WORKING CAPITAL Net working capital, calculated as the difference between current assets and current liabilities, amounted to Rp4,638 billion as of December 31, 2013 and Rp1,976 billion US160 million as of December 31, 2014. The decrease in net working capital was primarily due to: - A decrease of Rp4,075 billion in other current financial assets; - A decrease of Rp48 billion in asset held for sale; - A decrease of Rp35 billion in inventories – net of provision for obsolescene; and - A decrease of Rp12 billion in other receivable - net of provision for impairment of receivable. This was partially offset by: - An increase of Rp1,378 billion in short-term bank loan; - An increase of Rp806 billion in current marturities of long-term liabilities; - An increase of Rp473 billion in unearned income; and - An increase of Rp286 billion in trade payable – third parties. We believe that our working capital is sufficient for our present requirements. We expect that our working capital will continue to be addressed by various funding sources, including cash from operating activities and bank loans. SOLVENCY Our solvency or our ability to meet our short-term and long-term obligations highly influenced by our source of liquidity. Refer to explanation on “Liquidity”. A. Current Liabilities Our ability to pay our current liabilities is indicated by the ratios on the table below: Ratios 2014 2013 2012 Current ratio 106.2 116.3 116.0 Quick ratio 104.7 114.5 113.6 Cash ratio 64.4 75.8 74.4 B. Non-Current Liabilities Our ability to pay our debt is indicated by the ratios on the table below Ratios 2014 2013 2012 Debt to equity ratio 34.6 33.5 37.4 Debt to EBITDA 50.4 46.4 48.0 Times interest earned ratio 25.6 times 29.0 times 19.5 times For detail discussion about our debt, see Notes 17-21 to our Consolidated Financial Statements. 133 2014 Annual Report PT Telkom Indonesia Tbk Persero RECEIVABLE COLLECTIBILITY Our receivable collectability, indicated by the ratios average collection period that show an average of days that we take to collect our receivable and receivable turnover that show how many times in average the funds invested in receivable are turned in one year. Our average collection period were 25.4 days in 2014 and 24.7 days in 2013. Our receivable turnover for 2014 and 2013 were 14.4 and 14.8. We have made provision for impairment of receivables based on the collectability amount of the historical impairment rates and individual account of its customers’ credit quality and credit history, amounted to Rp3.096 in 2014 and Rp2.872 billion in 2013. As of December 31, 2014 and 2013, the carrying amount of our receivables considered past due but not impaired amounted to Rp3.355 billion and Rp2.418 billion, respectively. We concluded that past due but not impaired receivables, along with receivables that are neither past due nor impaired, are due from customers with good debt history and are expected to be recoverable. For detail discussion about our receivable, see Note 6 to our Consolidated Financial Statements. CAPITAL STRUCTURE Our capital structure as of December 31, 2014 is described as follows: Amount Portion Rp billion Short Term 1,810 1.99 Long Term 21,642 23.76 Debt 23,452 25.75 Equity 67,807 74.25 Total Invested Capital 91,259 100 We take a qualitative approach towards our capital structure and debt levels. Under our syndicated loan agreement with BNI and BRI, we are required to maintain a debt to equity ratio of not more than 2.0 and debt service coverage ratio of more than 1.25. As of December 31, 2014, our debt to equity ratio was 34.6 and our debt service coverage ratio was 4.8 times, indicating our strong ability to meet our debt obligations. Our debt levels are primarily driven by our plans to develop our existing and new strategic businesses. In determining our optimum debt levels, we also consider our debt ratios with reference to regional peers in the telecommunications industry. For detail discussion about management policy on capital structure, see Note 45 to our Consolidated Financial Statements. CAPITAL ExPENDITURES In 2014, we incurred capital expenditures of Rp24,661 billion US1,991 million. Our capital expenditures are grouped into the following categories for planning purposes: Broadband services, which consist of broadband, IT, application and content and service node; Network infrastructure, which consists of core transmission network, metro-ethernet and Regional Metro Junction “RMJ”, IP backbone and satellite; Optimizing legacy, for fixed lines; and Capex supports. 134 2014 Annual Report PT Telkom Indonesia Tbk Persero FINANCIAL AND PERF ORMANCE HIGHLIGHT MANA GEMENT REPOR T PREF A GENERAL INF ORMA TION OF TELK OM INDONE SIA MANA GEMENT’S DISCUSSION AND ANAL Y SIS CORPORA TE GO VERNANCE SOCIAL AND ENVIRONMENT AL RE SPONSIBILITY APPENDICE S